Better Broadband Better Lives

WASHINGTON, January 8, 2009 – President-elect Barack Obama said Thursday that “expanding broadband lines across America” was a key component of the economic plan that he is putting together and for which he is seeking Congressional passage.

The announcement came on top of several detailed and specific proposals to include broadband-related investments to the stimulus package currently being considered by legislators and the incoming Obama administration.

On Wednesday, the Information Technology and Innovation Foundation released its own eagerly-awaited proposal about the economic benefits of a broadband stimulus plan. It found that $30 billion technology investment would generate 949,000 jobs.

The 22-page report, “The Digital Road to Recovery,” linked investment in broadband networks, health information technology and a “smart power grid,” and attempted to estimate job creation based upon a “network effect multiplier.”

Some critics took aim at the proposal’s apparent emphasis on tax credits, as opposed to government grants, to undertake a massive deployment of fiber-optic technologies.

Others suggested that in attempting to be technology-neutral, and not endorse a specific technology – like fiber-optics – ITIF’s proposal would lead to lower-grade broadband like cable modems or Digital Subscriber Line (DSL) modems.

The ITIF report found that a $10 billion investment in broadband would generate about 498,000 jobs, according to the study: 50,000 in the telecommunications industry, 14,000 in direct capital equipment, 166,000 in “indirect and induced jobs,” and 268,000 because of the “network effect.” The other jobs would come through similar investments in health IT and energy grids.

The think tank, which has generally be aligned with the information technology industry, proposed broadband investments aimed at three primary goals: getting broadband to unserved areas, expanding network speeds beyond “first generation broadband” of 3 megabits per second (Mbps) or less, and spurring increased adoption of broadband by households.

In the study, ITIF said there were 10 million homes and businesses without broadband access. Of those underserved individuals, 90 percent of them could be connected with $3.6 billion in tax incentives to telecom companies, and up to $5 billion in grants for higher-cost areas.

ITIF also supported “federal funding to map broadband speeds throughout the country,” and allowing expenses related to purchases of computers and monthly broadband service to qualify for existing lifeline programs aimed to ensure universal telephone service.

“Increased investment I one of the best tools to stimulate aggregate demand and quickly get American workers back on the payrolls,” concluded the report, authored by Robert Atkinson, President of ITIF, and ITIF Senior Analysts Daniel Castro and Stephen Ezell.

“Spurring investments in IT infrastructure not only can provide an important short-term boost to the U.S. economy; it also can lay the groundwork for long-term economic growth [and] international competitiveness,” said ITIF.

Critics taking aim at the proposal’s apparent emphasis on tax credits included Jim Baller, an attorney who has been shepherded a broad consensus of industry and nonprofit groups around a National Broadband Strategy.

The ITIF proposal “relies almost entirely on tax credits, particularly for high-capacity networks, which benefit only the private sector,” said Baller. “He would apparently use grants only to support low-capacity networks in the most sparsely populated areas or to upgrade networks for schools, libraries, hospitals, and government buildings.”

“Tax credits can be helpful, but it only helps those companies that make profits,” said John Windhausen, President of Telepoly Consulting, and the author the EDUCAUSE report, “A Blueprint for Big Broadband.”

Additionally, said Windhausen, “with a tax incentive program, it is very hard to know what investment has been incented by the tax credit.”

The extent of Verizon Communications’ investment – the company says it has invested $23 billion in fiber-optic networks – makes it hard to assess which additional investments would have been made anyway, in the event of a broadband stimulus package.

Atkinson replied that up to $5 billion of the proposed $10 billion for broadband investment would be through grants, as opposed to tax credits.

Windhausen advocated that any stimulus funds be directed exclusively to federal grants to areas that need broadband. At least three categories of organizations that would benefit from such grants – municipalities, non-profit rural cooperatives and competitive telephone companies –wouldn’t benefit from a credit because they haven’t made profits.

The EDUCAUSE proposal, released in January 2008, sought $32 billion in federal funding over four years, seeks to build out 100 Mbps service to every home in the country. The original proposal sought one-third funding from federal government, the states, and the private sector – bringing the total investment to nearly $100 billion.

But Windausen said that the dire financial condition of state governments meant that municipalities and other seeking to create fiber-optic deployments should have greater flexibility in the funding sources to which they turn for development dollars.

In its own stimulus proposal, released in December, the advocacy group Free Press called for $30 billion in grant- and loan-based deployment of broadband, with an additional $8 billion devoted to tax credits.

Free Press also seeks an additional $6 billion aimed at measures designed to stimulate demand for broadband.

Of the $30 billion of direct federal investment, the Free Press proposal would create a $15 billion Universal Broadband Infrastructure fund, a $5 billion Universal Broadband Mobile Infrastructure fund, and allocated up to $10 billion in bond program for investment by non-incumbents.

Of the $8 billion that Free Press allocated for tax credits, $5 billion would go to the creation of a “Competitive Fiber Tax Incentive” program that would government in the decision-makers seat about many of the rules by which these fiber-optic networks would be built.

The ITIF report was released at a packed event at the National Press Club.

In addition to EDUCAUSE and Free Press, other groups with fiber-focused broadband-related stimulus plans include Broadband Properties magazine, the Fiber to the Home Council, and a group promoting a Rural Fiber Fund. Others with reports include the Benton Foundation, the Communications Workers of America, the Brookings Institution and the Center for American Progress. Editor’s Note: BroadbandCensus.com has received financial support from the Benton Foundation.

Industry groups including the Telecommunications Industry Association have also weighed in with specific policy recommendations.

As a public service to facilitate understanding and comparison of these proposals, BroadbandCensus.com – a free information and news site about local broadband speeds, prices, availability, reliability and competition – on Thursday publicly launched a wiki cataloging broadband-related proposals.

In the future, a BroadbandCensus.com user login will be required to make additions to the wiki. In the interest of getting this wiki page up and running, the login requirement has been temporarily lifted.

Drew Clark is the Chairman of the Broadband Breakfast Club. He tracks the development of Gigabit Networks, broadband's impact, and the universal service fund @BroadbandCensus. He is also Of Counsel with the firm of Best Best & Krieger LLP. The articles and posts on BroadbandBreakfast.com and affiliated social media, including LinkedIN, are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors.